Bamako: Mali's embattled transitional government on Monday rejected a rebel alliance's declaration of an Islamic state in the vast desert north, a move that has plunged the nation closer to breakup two months after a coup.

The overnight statement by Tuareg and Islamist rebels that they have joined forces to create "the transitional council of the Islamic state of Azawad" came as interim president Dioncounda Traore was in Paris for medical treatment after being assaulted by protesters who stormed his office last week.

It underlined the chaos gripping Mali, once considered an example of democracy in the region, since a March 22 coup.

"The government of Mali categorically rejects the idea of the creation of an Azawad state, even more so of an Islamic state," Hamadoun Toure, information minister in the transitional administration, told.

"Even though this state creation is just on paper and not de facto, we are coming forward to stress that Mali is secular and will remain secular," he said.

The accord between the Islamist group Ansar Dine (Defenders of Faith) and the secular Tuareg National Movement for the Liberation of Azawad (Tuareg MNLA) comes after weeks of sometimes fraught discussions between two groups that have long held separate objectives and ideologies.

The Economic Community of West African States (ECOWAS),which is playing the role of ediator in the Mali crisis, reacted ambivalently to the move.

"It's always better to negotiate with one single group than with several groups whose interests are sometimes diametrically opposed," said Burkina Faso Foreign Minister Djibrill Bassole, whose country is leading the talks.

But he said mediators reject any solution that splits the country in two.

"The essential thing (is) that the groups choose the option of a negotiated solution to the conflict," he added, calling on the newly formed alliance to "abandon terror and terrorism".

In Gao, a major town in the north where leaders of the two movements have been holding talks, the sealing of the deal was greeted by the sound of guns being fired into the air, local residents said.